Salvadoran Banks Oppose Fixing Interest Rates

A credit card law proposal being studied by the Legislative Assembly would set a maximum interest rate of 22%.

Thursday, July 23, 2009

Both the Banking Association of El Salvador (ABANSA), and the National Private Enterprise Association (ANEP), support the creation of a credit card law, that would provide greater transparency to the market, but disagree in regulating interest rates.

ABANSA chairman Armando Arias told newspaper La Prensa Gráfica: "We disagree with fixing interest rates, as we see it as price control. By principle we are against price controls, as we believe it is counter productive for the consumers and the financial system."

More on this topic

El Salvador: Credit Card Law Needs Improvement

November 2009

The Banking Association remarked there is room for improvement in the credit card law recently approved by Congress.

Armando Arias, head of the Association, argues the law needs to better define how to calculate effective rates. reported: "The deadline for credit card issuers to modernize their information systems is another point in need of clarification, argued Arias.

El Salvador: Credit Card Law in September

August 2009

The new law will oversee issuance, operation, administration and closure of credit and debit cards.

Some of the aspects included in the new legislation will be commissions, fees for late payments and interest rates.

Representative Blanca Coto commented in newspaper "We intend to protect the user from abuses, … and obviously to lower interest rates".

El Salvador: Credit Card Law in its Final Stretch

July 2009

It will regulate the relationship between cardholders and issuers, by defining rules regarding contracts and interest rates.

With the new law, interest rates shall not be more than 10 points above the effective weighted average rate calculated by the Central Bank.

Guadalupe Hernández writes in "For example, the average interest rate for a one year loan is 9.2%, so credit card rates could not be above 19.2% with the new law. However, in reality issuers charge interest rates that fluctuate from 29% to 38.9% for a $1.000 loan."

El Salvador: Study on Credit Cards Being Conducted

March 2009

The Superintendent of Competition conducted a study on the credit and debit card market between April and August.

Journalist Daniel Choto wrote in "The research will include an analysis of legislation, marketing strategies, management, costs, pricing policies and interests, as well as licenses to operate such services. What is sought, among other things, is whether there is a dominant position of one issuer."

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